Nieminen presents the idea that procurement process consists of the six following stages;
Determining the necessity, supplier selection, contracting, ordering, delivery control and follow-up and evaluation. Van Weele suggest the same six phases, where the latter five compose procurement, all six purchasing, the first three tactical sourcing and latter three order function. This is shown in Figure 2 below.
Figure 2 Stages of a procurement process Nieminen (2016) and van Weele (2014) 1)Determining
the necessity
6)Follow-up and evaluation 5)Delivery
control 4)Ordering
3)Contracting 2)Supplier
selection
Determining the necessity sets the way for the rest of the procurement. The determination can vary from just the product needed to having an exact model and manufacturer. The less determined the end product is, the more freedom there is for supplier selection criteria. (Swift 1995) Practical determination is such that only determines the mandatory and significant criteria. This allows for the company to look for the best option from the supplier market.
When purchasing a product, qualitative specification is also present as a part of determination of the necessity. (Nieminen 2016)
The second stage is commonly thought to be supplier selection, in older literature often called vendor selection (van Weele 2014). The first stage of supplier selection is to examine, whether or not a contract exists for this specific type of procurement. If this contract does not exist, a new one should be generated. If a contract does not exist, a supplier will be selected in this second stage of procurement. After this is done, the selection must be made official by making a contract concerning all parties involved. This is the third stage of procurement, contracting.
A contract is not always needed as at times an order confirmation can serve as the contract.
(Nieminen 2016) Contracts are made to ensure that all parties involved abide to the clauses agreed and so do not breach the contract. In procurement the most common breach of contract is maverick buying. This means purchasing a product or service even though the company has a contract for buying said product. There are different types of maverick buying, some unintentional and some not. (Karjalainen, Kemppainen & van Raaij 2009)
If a new contract is necessary, appropriate legislatives must be taken into account. A legislative that applies to all contracts in Finland and that is Law of Property Juridical Transactions (1929/228). Different legislatives that can affect contracts depend on the field of business as well as the procurement type. Examples of these legislatives in Finland include Copyright Law (1961/404) and Drug Regulation Act (1987/693). The clauses in contracts are especially important in B2B-sales as corporations do not have Consumer Protection Law by their side, like individual consumers do. (Nieminen 2016) It should also be noted that a verbal contract is legally as binding as a literary one, but the latter one should be used as it serves as concrete evidence in case of dispute. Contracts should have a clear structure and denote clauses and compensations with clear dates when the contract starts and expires. A contract can also be open-ended, meaning that it is effective until it is actively terminated by a party involved.
These are less common in the corporate world. (The World Bank 2018) In order to make the procurement process more efficient, prefabricated layouts are often used and only the details concerning the specific contract are changed (Nieminen 2016).
Ordering is the fourth stage and the first stage of both order function and supply stage (van Weele 2014). This is the point of the process that the supplier is given the information, that they are used and details of the purchase. These can include for example, what products are wanted and by what date. In order to avoid buying multiples of the same product, supplying them from the same supplier can be beneficial as they can hold a records of what has already been purchased. Information flow inside a company’s procurement department can be lacking or inefficient especially, when the company in case is a large company purchasing multiple different types of products and services. (Nieminen 2016) Terms of delivery are indicated using the most recent Incoterms delivery clauses. Currently the most recent Incoterms is the Incoterms 2020 edition, published in 2019. Incoterms are procurement clauses published and trademarked by the International Chamber of Commerce, often abbreviated as ICC. They are in global use and translated into 29 different languages, making them efficient to use with international suppliers as well. The abbreviations are simple and wide-spread making them popular in use. (International Chamber of Commerce)
Automating ordering routine purchases has become an ever increasing trend. This is due to the fact that often the products purchased are both small in value and purchased often. By purchasing these products manually each time, could make the procurement of the product more expensive than the product itself, making the process highly inefficient. Automatization makes for a large instalment, when first purchased, but can save the company money in the long run. This does not apply to one-time orders as many different variables have to be taken into account and criteria have yet to be specified. (Ghadimi, Ghassemi, Toosi & Heavey 2018)
The fifth stage of the procurement process is widely agreed to be delivery control. Nicoletti (2018) argues that the procurement is finished by the time the product purchased reaches the orderer, meaning that he considers this to be the final stage of procurement. Delivery control, the fifth stage, is not necessarily needed, if everything goes according to plan. This is done to ensure that the purchased products or services are delivered and that the amount, quality,
price and delivery time correspond to the ones on the contract and checking that the basic requirements are fulfilled by the supplier. (van Weele 2014) Delivery control can also entail checking that all reports needed are included in the delivery. This stage also includes checking up on the suppliers and products or services, to help make the best possible supplier selection the next time. Solving different issues regarding the delivery and product or service is one of the main objective of delivery control. If an issue is detected during these stage, a reclamation should be made without delay. (Nieminen 2016) The last and final stage of procurement, according to both Nieminen and van Weele, as well is follow-up and evaluation. This evaluation should be executed systematically in order to be used to improve the whole procurement process making it more efficient.